SAFETY HARBOR — How much money should the city keep in savings for a rainy day?
The answer in Safety Harbor: at least 37 percent of the city's operating budget, or almost $5 million.
But the city currently has even more than that stashed away.
In a 4-1 vote Monday night, city commissioners decided their official policy would be to maintain a minimum of 37 percent in two city reserve balances.
The "minimum fund balance" would be kept at 17 percent of the general fund amount. That would be about $2.2 million this year, or approximately two months of operating expenses. There are few restrictions on the use of that money, so it could be spent on unexpected bills or to fill a budget gap.
In addition, the commission decided to set aside another 20 percent of the general fund amount for a new "stabilization reserve."
At about $2.6 million this year, that reserve could be used only in the event of a major disaster such as environmental damage, a flood, fire or tornado.
The 37 percent would be a minimum, but the city is well above the minimum now.
When the 2011 fiscal year ends Sept. 30, the city's total reserve balance is expected to be $8.8 million — more than 50 percent of the city's $13 million operating fund. Mayor Andy Steingold was the lone dissenter on adopting the 37 percent minimum. He wanted at least 40 percent.
As long as the economy is in the shape that it's in, he said, the city should be aggressive about saving.
"We have one of the lowest millage rates in the county," Steingold said of the city's property tax rate. "We are not increasing the millage rate because we are able to use the reserve to offset the shortfall."
Safety Harbor's millage rate is 3.38 mills per $1,000 of property value. To help balance the 2012 fiscal year budget, the city plans to pull nearly $582,000 from the reserves.
Local governments are sometimes criticized for building large reserves. Residents often argue that the money should be returned to taxpayers in the form of lower tax rates.
But Commissioner Nina Bandoni said the 37 percent figure is appropriate for these times.
"I happen to be very concerned about the financial markets and that's why I've been so hesitant to let go of money," Bandoni said. "In future times, if I was more optimistic, I would be more inclined to talk about giving a (tax) rebate. Right now, with so much unknown in the economy, I don't know if I feel comfortable with that."
Contact Demorris A. Lee at firstname.lastname@example.org and (727) 445-4174.